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PRADA S.p.A. Interim / Quarterly Report 2016
50262_rns_2015-12-15_ab42cf0d-93af-456c-a4e2-d9145229b2b9.pdf
Interim / Quarterly Report
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Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this announcement, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this announcement.
PRADA spa
(Stock Code: 1913)
ANNOUNCEMENT OF THE CONSOLIDATED RESULTS FOR THE NINE MONTHS ENDED OCTOBER 31, 2015
- Net revenues were Euro 2,582.5 million, an increase of 1.2% compared with the nine months ended October 31, 2014 (-7% at constant exchange rates)
- Retail net sales were Euro 2,253.5 million, up by 3.8% compared with the nine months ended October 31, 2014 (-4.9% at constant exchange rates)
- EBIT was Euro 373.9 million, representing a margin of 14.5% on net revenues
- Group's net income amounted to Euro 235.1 million
- Net financial position negative at Euro 197.8 million
Consolidated results for the nine months ended October 31, 2015
The Board of Directors (the “Board”) of PRADA S.p.A. (the “Company”, or “PRADA spa”) announces the unaudited Consolidated results of the Company and its subsidiaries (collectively, the “Group”) for the nine months ended October 31, 2015, together with the unaudited comparative figures for the same nine months period ended October 31, 2014. The following financial information has been prepared in accordance with the International Financial Reporting Standards (“IFRS”) as adopted by the European Union. The Consolidated results of the Group for the year ended January 31, 2015, were audited by Deloitte & Touche S.p.A.
Key financial information
| Key information from the Income statement (amounts in thousands of Euro) | nine months ended Oct 31 2015 (unaudited) | twelve months ended Jan 31 2015 (audited) | nine months ended Oct 31 2014 (unaudited) | % change vs Oct 31 2014 |
|---|---|---|---|---|
| Net revenues | 2,582,544 | 3,551,696 | 2,552,023 | 1.2% |
| EBITDA | 595,400 | 954,249 | 681,678 | -12.7% |
| EBITDA % | 23.1% | 26.9% | 26.7% | - |
| EBIT | 373,889 | 701,551 | 496,433 | -24.7% |
| EBIT % | 14.5% | 19.8% | 19.5% | - |
| Income before tax | 355,362 | 667,702 | 480,909 | -26.1% |
| Net income of the Group | 235,078 | 450,730 | 319,319 | -26.4% |
| Earnings per share (Euro) | 0.092 | 0.176 | 0.125 | -26.4% |
| Capital expenditure | 234,722 | 449,735 | 353,074 | - |
| Net operating cash flows | 200,804 | 483,597 | 364,322 | -44.9% |
| Average number of employees | 12,379 | 11,962 | 11,866 | 4.3% |
| Key information from the Statement of financial position (amounts in thousands of Euro) | as at Oct 31 2015 (unaudited) | as at Jan 31 2015 (audited) | as at Oct 31 2014 (unaudited) | change vs Jan 31 2015 |
| Net operating working capital | 732,291 | 563,409 | 528,177 | 168,882 |
| Net invested capital | 3,212,948 | 2,829,359 | 2,724,483 | 383,589 |
| Net financial position surplus/(deficit) | (197,778) | 188,788 | 90,388 | (386,566) |
| Group shareholders' equity | 2,997,517 | 3,000,737 | 2,797,832 | (3,220) |
Highlights for the nine months ended October 31, 2015
Net revenues of the PRADA Group for the nine months ended October 31, 2015, amounted to Euro 2,582.5 million, reporting an increase of 1.2% compared to the same period of 2014. The growth in sales was delivered by the retail channel, thanks also to the exchange rates trends. However, from July onwards the turmoil in financial markets partially mitigated such positive impact, particularly with reference to the tourist flows of Chinese customers. The management adopted further costs containments measures with the aim to preserve economic margins and these initiatives allowed to limit the dilution of the EBIT that, for the nine months under review, amounted to Euro 373.9 million, or 14.5% of net revenues. The decline in profitability compared to the 19.5% achieved in the same period last year was mainly due to the rising selling costs associated with the expansion of the retail network which were not absorbed by sales growth.
During the reporting period, the Group, with a long-term perspective, continued anyway to invest in its industrial operations and, more selectively, in the retail network with renewals, relocations and some additional openings. At the same time, the investments aimed at strengthening the brands image went on and, to this extent, it is worth mentioning the unveiling of the new museum and cultural center in Milan operated by the Prada Foundation and designed by Rem Koolhaas. The resonance of this project has been extremely wide all over the world and the location has become since the beginning a "must see" for all visitors to Milan.
In the nine months period, the net cash flow from operating activities amounted to Euro 200.8 million and was used, together with funds already available, to support the investment plan of the period and the payment of dividends. The net financial position at October 31, 2015, was negative and stood at Euro 197.8 million.
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Consolidated income statement for the nine months ended October 31, 2015
| (amounts in thousands of Euro) | Note | nine months ended October 31 2015 (unaudited) | % on Net revenues | nine months ended October 31 2014 (unaudited) | % on Net revenues |
|---|---|---|---|---|---|
| Net revenues | 3 | 2,582,544 | 100.0% | 2,552,023 | 100.0% |
| Cost of goods sold | (695,440) | -26.9% | (715,608) | -28.0% | |
| Gross margin | 1,887,104 | 73.1% | 1,836,415 | 72.0% | |
| Operating expenses | 4 | (1,513,215) | -58.6% | (1,339,982) | -52.5% |
| EBIT | 373,889 | 14.5% | 496,433 | 19.5% | |
| Interest and other financial income/(expenses), net | 5 | (20,089) | -0.8% | (15,979) | -0.6% |
| Dividends received from third parties | 1,562 | 0.1% | 455 | - | |
| Income before taxes | 355,362 | 13.8% | 480,909 | 18.9% | |
| Taxation | 6 | (117,139) | -4.6% | (154,712) | -6.1% |
| Net income for the period | 238,223 | 9.2% | 326,197 | 12.8% | |
| Net income – Non-controlling interests | 3,145 | 0.1% | 6,878 | 0.3% | |
| Net income – Group | 235,078 | 9.1% | 319,319 | 12.5% | |
| Depreciation, amortization and impairment | 221,511 | 8.6% | 185,245 | 7.2% | |
| EBITDA | 595,400 | 23.1% | 681,678 | 26.7% | |
| Basic and diluted earnings per share (in Euro per share) | 7 | 0.092 | 0.125 |
Consolidated income statement for the three months ended October 31, 2015
| (amounts in thousands of Euro) | Note | three months ended Oct 31 2015 (unaudited) | % on Net revenues | three months ended Oct 31 2014 (unaudited) | % on Net revenues |
|---|---|---|---|---|---|
| Net revenues | 3 | 758,111 | 100.0% | 800,708 | 100.0% |
| Cost of goods sold | (196,920) | -26.0% | (221,893) | -27.7% | |
| Gross margin | 561,191 | 74.0% | 578,815 | 72.3% | |
| Operating expenses | (480,516) | -63.4% | (455,540) | -56.9% | |
| EBIT | 80,675 | 10.6% | 123,275 | 15.4% | |
| Interest and other financial income/(expenses), net | (11,017) | -1.5% | (6,486) | -0.8% | |
| Income before taxes | 69,658 | 9.2% | 116,789 | 14.6% | |
| Taxation | (23,000) | -3.0% | (41,637) | -5.2% | |
| Net income for the period | 46,658 | 6.2% | 75,152 | 9.4% | |
| Net income – Non-controlling interests | 174 | 0.0% | 679 | 0.1% | |
| Net income – Group | 46,484 | 6.1% | 74,473 | 9.3% | |
| Depreciation, amortization and impairment | 74,671 | 9.8% | 65,568 | 8.2% | |
| EBITDA | 155,346 | 20.5% | 188,843 | 23.6% |
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Consolidated statement of financial position
| (amounts in thousands of Euro) | Note | as at
October 31
2015
(unaudited) | as at
January 31
2015
(audited) |
| --- | --- | --- | --- |
| Assets | | | |
| Current assets | | | |
| Cash and cash equivalents | | 527,248 | 708,966 |
| Trade receivables, net | 9 | 248,256 | 346,284 |
| Inventories, net | 8 | 795,674 | 654,545 |
| Derivative financial instruments - current | | 9,295 | 6,287 |
| Receivables from, and advance payments to, related parties - current | 10 | 20,590 | 3,240 |
| Other current assets | 12 | 185,759 | 180,633 |
| Total current assets | | 1,786,822 | 1,899,955 |
| Non-current assets | | | |
| Property, plant and equipment | 11 | 1,495,918 | 1,474,218 |
| Intangible assets | 11 | 938,095 | 943,304 |
| Associated undertakings | | 23,552 | 30,529 |
| Deferred tax assets | | 298,964 | 280,983 |
| Other non-current assets | 13 | 101,871 | 91,353 |
| Derivative financial instruments non-current | | 1,050 | 1,106 |
| Receivables from, and advance payments to, related parties – non-current | 10 | 7,835 | 17,429 |
| Total non-current assets | | 2,867,285 | 2,838,922 |
| Total Assets | | 4,654,107 | 4,738,877 |
| Liabilities and Shareholders' equity | | | |
| Current liabilities | | | |
| Bank overdrafts and short-term loans | | 305,886 | 263,335 |
| Payables to related parties - current | 14 | 3,083 | 3,083 |
| Trade payables | 15 | 311,639 | 437,420 |
| Current tax liabilities | | 98,115 | 133,914 |
| Derivative financial instruments - current | | 25,419 | 56,772 |
| Obligations under finance leases - current | | - | 21 |
| Other current liabilities | 16 | 136,893 | 220,480 |
| Total current liabilities | | 881,035 | 1,115,025 |
| Non-current liabilities | | | |
| Long-term financial payables | | 417,448 | 255,203 |
| Post-employment benefits | | 68,298 | 85,754 |
| Provision for risks and charges | 17 | 65,657 | 63,695 |
| Deferred tax liabilities | | 39,097 | 41,634 |
| Other non-current liabilities | | 157,150 | 128,752 |
| Derivative financial instruments non-current | | 10,252 | 17,283 |
| Payables to related parties – non-current | 14 | - | 13,384 |
| Total non-current liabilities | | 757,902 | 605,705 |
| Total Liabilities | | 1,638,937 | 1,720,730 |
| Share capital | | 255,882 | 255,882 |
| Total other reserves | | 2,348,146 | 2,163,129 |
| Translation reserve | | 158,411 | 130,996 |
| Net profit for the period | | 235,078 | 450,730 |
| Total Shareholders' equity – Group | | 2,997,517 | 3,000,737 |
| Shareholders' equity – Non-controlling interests | | 17,653 | 17,410 |
| Total Liabilities and Shareholders' equity | | 4,654,107 | 4,738,877 |
| Net current assets | 905,787 | 784,930 |
| --- | --- | --- |
| Total assets less current liabilities | 3,773,072 | 3,623,852 |
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Statement of changes in consolidated shareholders' equity (amounts in thousands of Euro, except for number of shares)
| (amounts in thousands of Euro) | Number of Shares | Share Capital | Translation Reserve | Share premium reserve | Cash flow hedge reserve | Actuarial Reserve | Fair Value Available for sale Reserve | Other reserves | Total Other Reserves | Net income for the period | Equity attributable to owners of Group | Equity Non-controlling interests | Total Equity |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Balance at January 31, 2014 (audited) | 2,558,824,000 | 255,882 | (49,438) | 410,047 | 3,699 | (11,452) | 4,108 | 1,446,923 | 1,853,325 | 627,785 | 2,687,554 | 13,986 | 2,701,540 |
| Allocation of 2013 net income | - | - | - | - | - | - | - | 627,785 | 627,785 | (627,785) | - | - | - |
| Dividends | - | - | - | - | - | - | - | (281,471) | (281,471) | - | (281,471) | (6,763) | (288,234) |
| Acquisition of Marchesi Angelo srl | - | - | - | - | - | - | - | (2,462) | (2,462) | - | (2,462) | 106 | (2,356) |
| Capital injection in subsidiaries | - | - | - | - | - | - | - | - | - | - | - | 1,773 | 1,773 |
| Comprehensive income for the nine months (recyclable to P&L) | - | - | 78,366 | - | (11,204) | - | 9,668 | - | (1,536) | 319,319 | 396,149 | 7,937 | 404,086 |
| Comprehensive income for the nine months (not recyclable to P&L) | - | - | - | - | - | (1,938) | - | - | (1,938) | - | (1,938) | - | (1,938) |
| Balance at October 31, 2014 (unaudited) | 2,558,824,000 | 255,882 | 28,928 | 410,047 | (7,505) | (13,390) | 13,776 | 1,790,775 | 2,193,703 | 319,319 | 2,797,832 | 17,039 | 2,814,871 |
| Dividends | - | - | - | - | - | - | - | - | - | - | - | (2,615) | (2,615) |
| Acquisition of Marchesi Angelo srl | - | - | - | - | - | - | - | (4) | (4) | - | (4) | 1 | (3) |
| Capital injection in subsidiaries | - | - | - | - | - | - | - | - | - | - | - | 352 | 352 |
| Comprehensive income for the three months (recyclable to P&L) | - | - | 102,068 | - | (27,818) | - | (2,661) | - | (30,479) | 131,411 | 203,000 | 2,636 | 205,636 |
| Comprehensive income for the three months (not recyclable to P&L) | - | - | - | - | - | (91) | - | - | (91) | - | (91) | (3) | (94) |
| Balance at January 31, 2015 (audited) | 2,558,824,000 | 255,882 | 130,996 | 410,047 | (35,323) | (13,481) | 11,115 | 1,790,771 | 2,163,129 | 450,730 | 3,000,737 | 17,410 | 3,018,147 |
| Allocation of 2014 net income | - | - | - | - | - | - | - | 450,730 | 450,730 | (450,730) | - | - | - |
| Dividends | - | - | - | - | - | - | - | (281,471) | (281,471) | - | (281,471) | (3,228) | (284,699) |
| Capital injection in subsidiaries | - | - | - | - | - | - | - | - | - | - | - | 409 | 409 |
| Transactions with non-controlling interests | - | - | - | - | - | - | - | (723) | (723) | - | (723) | (39) | (762) |
| Comprehensive income for the nine months (recyclable to P&L) | - | - | 27,415 | - | 20,694 | - | (5,535) | - | 15,159 | 235,078 | 277,652 | 3,101 | 280,753 |
| Comprehensive income for the nine months (not recyclable to P&L) | - | - | - | - | - | 1,322 | - | - | 1,322 | - | 1,322 | - | 1,322 |
| Balance at October 31, 2015 (unaudited) | 2,558,824,000 | 255,882 | 158,411 | 410,047 | (14,629) | (12,159) | 5,580 | 1,959,307 | 2,348,146 | 235,078 | 2,997,517 | 17,653 | 3,015,170 |
Condensed statement of consolidated cash flows
| (amounts in thousands of Euro) | nine months ended October 31 2015 (unaudited) | nine months ended October 31 2014 (unaudited) |
|---|---|---|
| Net cash flows from operating activities | 200,804 | 364,322 |
| Cash flows generated/(utilized) by investing activities | (304,629) | (311,966) |
| Cash flows generated/(utilized) by financing activities | (84,504) | (128,915) |
| Change in cash and cash equivalents, net of bank overdrafts | (188,329) | (76,559) |
Statement of consolidated comprehensive income
| (amounts in thousands of Euro) | nine months ended October 31 2015 (unaudited) | twelve months ended January 31 2015 (audited) | nine months ended October 31 2014 (unaudited) |
|---|---|---|---|
| Net income for the period – Consolidated | 238,223 | 459,218 | 326,197 |
| A) Items recyclable to P&L: | |||
| Change in Translation reserve | 27,371 | 182,519 | 79,425 |
| Tax impact | - | - | - |
| Change in Translation reserve less tax impact | 27,371 | 182,519 | 79,425 |
| Change in Cash Flow Hedge reserve | 28,266 | (52,817) | (15,092) |
| Tax impact | (7,572) | 13,795 | 3,888 |
| Change in Cash Flow Hedge reserve less tax impact | 20,694 | (39,022) | (11,204) |
| Change in Fair Value reserve | (7,380) | 9,343 | 12,891 |
| Tax impact | 1,845 | (2,336) | (3,223) |
| Change in Fair Value reserve less tax impact | (5,535) | 7,007 | 9,668 |
| B) Item not recyclable to P&L: | |||
| Change in Actuarial reserve | 1,823 | (2,338) | (2,033) |
| Tax impact | (501) | 306 | 95 |
| Change in Actuarial reserve less tax impact | 1,322 | (2,032) | (1,938) |
| Consolidated comprehensive income for the period | 282,075 | 607,690 | 402,148 |
| Comprehensive income for the period – Non-controlling Interests | 3,101 | 10,570 | 7,937 |
| Comprehensive income for the period – Group | 278,974 | 597,120 | 394,211 |
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Notes to the consolidated results for the nine months ended October 31, 2015
- Presentation of PRADA Group
PRADA spa (the "Company"), together with its subsidiaries (jointly the "Group"), is listed on the Hong Kong Stock Exchange (HKSE code: 1913). It is one of the world leaders in the luxury goods sector where it operates with the Prada, Miu Miu, Church's and Car Shoe brands in the design, production and distribution of luxury handbags, leather goods, footwear, apparel and accessories. The Group also operates, under licensing agreements, in the eyewear and fragrances sectors. Its products are sold in 70 countries worldwide through a network that included 612 Directly Operated Stores (DOS) at October 31, 2015, and a selected network of luxury department stores, independent retailers and franchise stores. The Company is a joint-stock company, registered and domiciled in Italy. Its registered office is in Via Antonio Fogazzaro 28, Milan, Italy.
- Basis of preparation
The financial information for the nine months ended October 31, 2015, included in this Announcement refers to the Group of companies controlled by PRADA spa, holding company of the PRADA Group (the "Group"), and is based on its relevant unaudited Consolidated financial statements. Such consolidated results for the nine months ended October 31, 2015, were prepared on a consistent basis compared to the Consolidated financial statements of the Group for the twelve months ended January 31, 2015, with the exception of the revised IFRS issued by the International Accounting Standard Board ("IASB") below reported. IFRS also refer to all the International Accounting Standards ("IAS") and all the interpretations of the International Financial Reporting Interpretation Committee ("IFRIC"), previously named the Standing Interpretations Committee ("SIC").
Amendments issued by the IASB, endorsed by the European Union and applicable to the PRADA Group from February 1, 2015
The following amendments to IFRS have been endorsed by the European Union and are applicable to the PRADA Group effective from February 1, 2015. These changes did not have any significant impact on the figures reported in this Announcement:
- Amendments to "IAS 19 Employee Benefits";
- Amendments to "IFRS 1 First Time Adoption of IFRS";
- Amendments to "IFRS 3 Business Combinations";
- Amendments to "IFRS 13 Fair Value Measurement";
- Amendments to "IAS 40 Investment Property";
- Amendments to "IFRS 2 Share-based Payment";
- Amendments to "IFRS 8 Operating Segments";
- Amendments to "IAS 16 Property, Plant and Equipment";
- Amendments to "IAS 24 Related Party Disclosure";
9
- Amendments to "IAS 38 Intangible Assets";
3. Net revenues analysis
Net revenues for the nine months ended October 31, 2015 (unaudited)
| (amounts in thousands of Euro) | nine months ended October 31 2015 (unaudited) | nine months ended October 31 2014 (unaudited) | % change | ||
|---|---|---|---|---|---|
| Net sales by geographical area | |||||
| Italy | 406,399 | 15.9% | 402,817 | 16.0% | 0.9% |
| Europe | 557,395 | 21.9% | 544,141 | 21.6% | 2.4% |
| Americas | 365,396 | 14.3% | 336,459 | 13.3% | 8.6% |
| Asia Pacific | 845,550 | 33.2% | 902,855 | 35.8% | -6.3% |
| Japan | 286,335 | 11.2% | 259,306 | 10.3% | 10.4% |
| Middle East | 83,442 | 3.3% | 74,017 | 2.9% | 12.7% |
| Other countries | 4,495 | 0.2% | 3,565 | 0.1% | 26.1% |
| Total | 2,549,012 | 100.0% | 2,523,160 | 100.0% | 1.0% |
| Net sales by brand | |||||
| Prada | 2,065,767 | 81.0% | 2,082,904 | 82.5% | -0.8% |
| Miu Miu | 411,686 | 16.2% | 373,498 | 14.8% | 10.2% |
| Church's | 60,481 | 2.4% | 54,921 | 2.2% | 10.1% |
| Car Shoe | 7,420 | 0.3% | 9,138 | 0.4% | -18.8% |
| Other | 3,658 | 0.1% | 2,699 | 0.1% | 35.5% |
| Total | 2,549,012 | 100.0% | 2,523,160 | 100.0% | 1.0% |
| Net sales by product line | |||||
| Clothing | 422,633 | 16.6% | 412,500 | 16.4% | 2.5% |
| Leather goods | 1,553,300 | 60.9% | 1,614,761 | 64.0% | -3.8% |
| Footwear | 523,194 | 20.5% | 451,979 | 17.9% | 15.8% |
| Other | 49,885 | 2.0% | 43,920 | 1.7% | 13.6% |
| Total | 2,549,012 | 100.0% | 2,523,160 | 100.0% | 1.0% |
| Net sales by distribution channel | |||||
| DOS | 2,253,465 | 88.4% | 2,171,675 | 86.1% | 3.8% |
| Independent customers and franchises | 295,547 | 11.6% | 351,485 | 13.9% | -15.9% |
| Total | 2,549,012 | 100.0% | 2,523,160 | 100.0% | 1.0% |
| Net sales | 2,549,012 | 98.7% | 2,523,160 | 98.9% | 1.0% |
| Royalties | 33,532 | 1.3% | 28,863 | 1.1% | 16.2% |
| Total net revenues | 2,582,544 | 100.0% | 2,552,023 | 100.0% | 1.2% |
Net revenues for the three months ended October 31, 2015 (unaudited)
| (amounts in thousands of Euro) | three months ended October 31 2015 (unaudited) | three months ended October 31 2014 (unaudited) | % change | ||
|---|---|---|---|---|---|
| Net sales by geographical area | |||||
| Italy | 120,189 | 16.1% | 116,009 | 14.6% | 3.6% |
| Europe | 178,217 | 23.8% | 182,602 | 23.0% | -2.4% |
| Americas | 100,484 | 13.4% | 103,007 | 13.0% | -2.4% |
| Asia Pacific | 235,284 | 31.5% | 283,634 | 35.8% | -17.0% |
| Japan | 90,433 | 12.1% | 84,044 | 10.6% | 7.6% |
| Middle East | 22,063 | 3.0% | 22,087 | 2.8% | -0.1% |
| Other countries | 985 | 0.1% | 877 | 0.1% | 12.3% |
| Total | 747,655 | 100.0% | 792,260 | 100.0% | -5.6% |
| Net sales by brand | |||||
| Prada | 604,274 | 80.8% | 651,790 | 82.3% | -7.3% |
| Miu Miu | 117,767 | 15.8% | 117,467 | 14.8% | 0.3% |
| Church's | 22,102 | 3.0% | 19,361 | 2.5% | 14.2% |
| Car Shoe | 1,906 | 0.3% | 2,622 | 0.3% | -27.3% |
| Other | 1,606 | 0.2% | 1,020 | 0.1% | 57.5% |
| Total | 747,655 | 100.0% | 792,260 | 100.0% | -5.6% |
| Net sales by product line | |||||
| Clothing | 134,404 | 18.0% | 136,721 | 17.3% | -1.7% |
| Leather goods | 445,539 | 59.6% | 504,046 | 63.6% | -11.6% |
| Footwear | 152,779 | 20.4% | 137,556 | 17.4% | 11.1% |
| Other | 14,933 | 2.0% | 13,937 | 1.7% | 7.1% |
| Total | 747,655 | 100.0% | 792,260 | 100.0% | -5.6% |
| Net sales by distribution channel | |||||
| DOS | 701,072 | 93.8% | 729,514 | 92.1% | -3.9% |
| Independent customers and franchises | 46,583 | 6.2% | 62,746 | 7.9% | -25.8% |
| Total | 747,655 | 100.0% | 792,260 | 100.0% | -5.6% |
| Net sales | 747,655 | 98.6% | 792,260 | 98.9% | -5.6% |
| Royalties | 10,457 | 1.4% | 8,448 | 1.1% | 23.8% |
| Total net revenues | 758,112 | 100.0% | 800,708 | 100.0% | -5.3% |
Number of stores
| as at October 31 2015 | as at January 31 2015 | as at October 31 2014 | ||||
|---|---|---|---|---|---|---|
| DOS | franchises | DOS | franchises | DOS | franchises | |
| Prada | 380 | 29 | 362 | 27 | 350 | 26 |
| Miu Miu | 173 | 11 | 169 | 8 | 167 | 7 |
| Church's | 54 | - | 55 | - | 55 | - |
| Car Shoe | 5 | - | 8 | - | 8 | - |
| Total | 612 | 40 | 594 | 35 | 580 | 33 |
| as at October 31 2015 | as at January 31 2015 | as at October 31 2014 | ||||
| DOS | franchises | DOS | franchises | DOS | franchises | |
| Italy | 52 | 5 | 51 | 6 | 52 | 6 |
| Europe | 168 | - | 167 | 3 | 164 | 3 |
| Americas | 114 | - | 110 | - | 104 | - |
| Asia Pacific | 184 | 27 | 175 | 22 | 170 | 21 |
| Japan | 73 | - | 70 | - | 70 | - |
| Middle East | 19 | 8 | 17 | 4 | 17 | 3 |
| Africa | 2 | - | 4 | - | 3 | - |
| Total | 612 | 40 | 594 | 35 | 580 | 33 |
- Operational expenses
| (amounts in thousands of Euro) | nine months ended October 31 2015 (unaudited) | % on net revenues | nine months ended October 31 2014 (unaudited) | % on net revenues |
|---|---|---|---|---|
| Product design and development costs | 95,942 | 3.7% | 96,172 | 3.8% |
| Advertising and communication costs | 144,911 | 5.6% | 120,295 | 4.7% |
| Selling costs | 1,110,476 | 43.0% | 971,608 | 38.0% |
| General and administrative costs | 161,886 | 6.3% | 151,907 | 6.0% |
| Total | 1,513,215 | 58.6% | 1,339,982 | 52.5% |
- Interest and other financial income/(expenses), net
| (amounts in thousands of Euro) | nine months ended October 31 2015 (unaudited) | nine months ended October 31 2014 (unaudited) |
|---|---|---|
| Interests expenses on borrowings | (10,824) | (9,206) |
| Interest expenses others | (73) | (121) |
| Interest income | 2,237 | 2,394 |
| Exchange gains /(losses) – realized | 1,613 | 2,816 |
| Exchange gains/(losses) – unrealized | (9,440) | (9,499) |
| Other financial income/(expenses) | (3,602) | (2,363) |
| Total | (20,089) | (15,979) |
13
6. Taxation
| (amounts in thousands of Euro) | nine months ended October 31 2015 (unaudited) | nine months ended October 31 2014 (unaudited) |
|---|---|---|
| Current taxation | 144,594 | 182,699 |
| Deferred taxation | (27,455) | (27,987) |
| Income taxes | 117,139 | 154,712 |
7. Earnings and dividends per share
Earnings per share
Earnings per share are calculated by dividing the net income of the period attributable to Group's shareholders by the weighted average number of ordinary shares in issue.
| nine months ended October 31 2015 (unaudited) | nine months ended October 31 2014 (unaudited) | |
|---|---|---|
| Group net income in Euro | 235,077,888 | 319,319,389 |
| Weighted average number of ordinary shares in issue | 2,558,824,000 | 2,558,824,000 |
| Earnings per share in Euro, calculated on weighted average number of shares | 0.092 | 0.125 |
Dividend per share
During the nine months ended October 31, 2015, the Company distributed dividends of Euro 281,470,640, as approved by the Shareholders' Meeting held on May 26, 2015, to approve the financial statements for the year ended January 31, 2015.
14
8. Inventories, net
| (amounts in thousands of Euro) | as at
October 31
2015
(unaudited) | as at
January 31
2015
(audited) |
| --- | --- | --- |
| Raw materials | 127,736 | 106,843 |
| Work in progress | 32,824 | 40,786 |
| Finished products | 699,204 | 571,115 |
| Allowance for obsolete and slow moving inventories | (64,090) | (64,199) |
| Total | 795,674 | 654,545 |
The increase in inventories was mainly attributable to a higher level of the stock of finished products due to the different approach to replenishment which started in the last few months of 2014, to the 18 DOS openings from January 31, 2015, and to the volume of sales that in the last months of 2015 was lower than expected.
Movements on the allowance for obsolete and slow moving inventories are analyzed as follows:
| (amounts in thousands of Euro) | Raw materials | Finished Products | Total |
|---|---|---|---|
| Balance at January 31, 2015 (audited) | 26,798 | 37,401 | 64,199 |
| Exchange differences | 4 | 3 | 7 |
| Additions | - | 33 | 33 |
| Utilization | - | (149) | (149) |
| Balance at October 31, 2015 (unaudited) | 26,802 | 37,288 | 64,090 |
9. Trade receivables, net
| (amounts in thousands of Euro) | as at
October 31
2015
(unaudited) | as at
January 31
2015
(audited) |
| --- | --- | --- |
| Trade receivables from third parties | 225,814 | 317,147 |
| Allowance for bad and doubtful debts | (7,213) | (7,784) |
| Trade receivables from related parties | 29,655 | 36,921 |
| Total | 248,256 | 346,284 |
The reduction in trade receivables from third parties is mainly due to seasonality of the wholesale business in terms of shipping and collection.
15
10. Receivables from, and advance payments to, related parties - current and non-current
Receivables from, and advance payments to, related parties current are detailed as follows:
| (amounts in thousands of Euro) | as at October 31 2015 (unaudited) | as at January 31 2015 (audited) |
|---|---|---|
| Financial receivables | - | 11 |
| Prepaid sponsorship | 13,629 | 5 |
| Other receivables and advance payments | 6,961 | 3,224 |
| Receivables from, and advance payments to, related parties - current | 20,590 | 3,240 |
Receivables from, and advance payments to, related parties non-current are detailed as follows:
| (amounts in thousands of Euro) | as at October 31 2015 (unaudited) | as at January 31 2015 (audited) |
|---|---|---|
| Prepaid sponsorship | 5,586 | 12,379 |
| Deferred rental income – long-term | 1,508 | 4,309 |
| Loans | 741 | 741 |
| Receivables from, and advance payments to, related parties – non-current | 7,835 | 17,429 |
11. Capital expenditure
Changes in the net book value of Property, plant and equipment in the period ended October 31, 2015, are as follows:
| (amounts in thousands of Euro) | Land and buildings | Production plant and machinery | Leasehold improvements | Furniture & fittings | Other tangibles | Assets under construction | Total net book value |
|---|---|---|---|---|---|---|---|
| Balance at January 31, 2015 (audited) | 477,940 | 21,176 | 513,302 | 178,661 | 70,273 | 212,866 | 1,474,218 |
| Additions | 47,222 | 12,600 | 69,395 | 21,434 | 3,703 | 55,033 | 209,387 |
| Depreciation | (11,202) | (7,514) | (127,376) | (36,291) | (7,905) | (4) | (190,292) |
| Disposals | (53) | (94) | (2,436) | (617) | (44) | (88) | (3,332) |
| Exchange differences | 10,196 | 40 | (477) | (804) | (93) | 199 | 9,061 |
| Other movements | 118,912 | 2,178 | 47,052 | 9,145 | 199 | (177,999) | (513) |
| Impairment | - | (64) | (1,938) | (574) | (35) | - | (2,611) |
| Balance at October 31, 2015 (unaudited) | 643,015 | 28,322 | 497,522 | 170,954 | 66,098 | 90,007 | 1,495,918 |
Changes in the net book value of Intangible assets in the period ended October 31, 2015, are as follows:
| (amounts in thousands of Euro) | Trade- marks | Goodwill | Store Lease Acquisitions | Software | Development costs and other intangible assets | Assets in progress | Total net book value |
|---|---|---|---|---|---|---|---|
| Balance at January 31, 2015 (audited) | 277,232 | 513,214 | 106,492 | 10,828 | 16,725 | 18,813 | 943,304 |
| Additions | 231 | 297 | 694 | 1,493 | 63 | 22,557 | 25,335 |
| Amortization | (8,659) | - | (14,994) | (2,928) | (1,499) | - | (28,080) |
| Disposals | - | - | (1,928) | (96) | - | - | (2,024) |
| Exchange differences | 2,594 | 465 | (2,543) | (70) | - | (57) | 389 |
| Other movements | - | - | 15,746 | 1,336 | (11) | (17,371) | (300) |
| Impairment | - | (120) | (409) | - | - | - | (529) |
| Balance at October 31, 2015 (unaudited) | 271,398 | 513,856 | 103,058 | 10,563 | 15,278 | 23,942 | 938,095 |
12. Other current assets
| (amounts in thousands of Euro) | as at October 31 2015 (unaudited) | as at January 31 2015 (audited) |
|---|---|---|
| VAT | 65,247 | 56,934 |
| Income tax and other tax receivables | 27,144 | 53,307 |
| Other assets | 27,228 | 11,454 |
| Prepayments and accrued income | 62,696 | 54,642 |
| Deposits | 3,444 | 4,296 |
| Total | 185,759 | 180,633 |
13. Other non-current assets
| (amounts in thousands of Euro) | as at October 31 2015 (unaudited) | as at January 31 2015 (audited) |
|---|---|---|
| Guarantee deposits | 73,966 | 70,004 |
| Deferred rental income | 12,836 | 9,056 |
| Pension fund surplus | 2,630 | 2,515 |
| Other long-term assets | 12,439 | 9,778 |
| Total | 101,871 | 91,353 |
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14. Payables to related parties – current and non-current
The current portion of payables to related parties is detailed as follows:
| (amounts in thousands of Euro) | as at
October 31
2015
(unaudited) | as at
January 31
2015
(audited) |
| --- | --- | --- |
| Financial payables | 2,433 | 2,371 |
| Other payables | 650 | 712 |
| Payables to related parties – current | 3,083 | 3,083 |
The non-current portion of payables to related parties is detailed as follows:
| (amounts in thousands of Euro) | as at
October 31
2015
(unaudited) | as at
January 31
2015
(audited) |
| --- | --- | --- |
| Other payables – other related parties | - | 13,384 |
| Payables to related parties – non-current | - | 13,384 |
As a result of transactions with Non-controlling shareholders of a Group's subsidiary during the nine months ended October 31, 2015, Fin-reta srl is no longer a related party but a third party. Consequently, the payables in question are now reported under "Other non-current liabilities".
15. Trade payables
| (amounts in thousands of Euro) | as at
October 31
2015
(unaudited) | as at
January 31
2015
(audited) |
| --- | --- | --- |
| Trade payables – third parties | 297,040 | 410,977 |
| Trade payables – related parties | 14,599 | 26,443 |
| Total | 311,639 | 437,420 |
16. Other current liabilities
| (amounts in thousands of Euro) | as at
October 31
2015
(unaudited) | as at
January 31
2015
(audited) |
| --- | --- | --- |
| Payables for capital expenditure | 43,068 | 128,346 |
| Accrued expenses and deferred income | 16,497 | 17,354 |
| Other payables | 77,328 | 74,780 |
| Total | 136,893 | 220,480 |
Payables for capital expenditure include liabilities for capital expenditure for Property, plant and equipment and Intangible assets. The decrease compared to January 31, 2015, was due to the payment of Euro 55 million for the purchase of the property in Milan used as the Company's headquarter.
17. Provisions for risks and charges
Movements in provisions for risks and charges are summarized as follows:
| (amounts in thousands of Euro) | Provision for litigation | Provision for tax disputes | Provisions for other charges | Total |
|---|---|---|---|---|
| Balance at January 31, 2015 (audited) | 1,876 | 25,537 | 36,282 | 63,695 |
| Exchange differences | 12 | 3 | 231 | 246 |
| Other | - | - | - | - |
| Reversals | (87) | - | (761) | (848) |
| Uses | (46) | (1,908) | (778) | (2,732) |
| Increases | 107 | 410 | 4,779 | 5,296 |
| Balance at October 31, 2015 (unaudited) | 1,862 | 24,042 | 39,753 | 65,657 |
During the nine months ended October 31, 2015, there were no significant developments regarding the litigations pending at January 31, 2015. However, it is worth noting the evolution of the position of PRADA spa to the enquiries of the Italian Tax Authority on the "CFC" (Controlled Foreign Companies) legislation. In October 2015, PRADA spa had a positive outcome related to CFC rulings which were submitted on June 2015 to the Italian Tax Authorities in order to obtain the non-application of the aforementioned legislation for the tax year 2014 with reference to the companies controlled by the Group and operating in "black list" countries. The positive outcome, which took effect from 2014 onwards - provided that significant changes in the structures of the companies involved will not occur - did not result in any change in the estimated tax burden of the period compared to the same nine months period of 2014 as the Directors considered reasonable not to include any liability in this regard.
As for the Dutch sub-holding company PRADA Far East bv, the CFC ruling for the non-application of the CFC legislation was not submitted for the tax year 2014 due to the absence of the legal regulatory requirements to qualify said sub-holding as a CFC company. As a result, the Consolidated income statement for the nine months ended October 31, 2015, does not contain any tax liability arising from the CFC regime for the above-mentioned subsidiary, while the nine months period under comparison included a charge of Euro 3 million.
19
Management Discussion and Analysis for the three months ended October 31, 2015
As already mentioned earlier, the third quarter results of 2015 were negatively impacted by the increased volatility recorded on some markets after summer.
In the three months ended October 31, 2015, net revenues amounted to Euro 758.1 million, 5.3% down compared to the same period of 2014. In absolute terms, the decline was recorded by the retail channel where all geographical areas, except for Italy and Japan, showed reductions compared to the same period of last year. In details, in markets such as Hong Kong and Macau the situation worsened with strong contractions of traffic and retail sales in general. In addition, the devaluation of the Renminbi recorded between August and September had a negative impact on the purchases made by the Chinese travelers.
Conversely, the gross margin of the three months period ended October 31, 2015, was 74%, showing an increase over the 72.3% recorded in the comparative period. The improvement was positively contributed by the exchange rates, the efficiencies achieved in the industrial processes and by the price adjustments implemented also to balance the spreads among countries. EBITDA for the period amounted to Euro 155.3 million, or 20.5% of net revenues (23.6% in the three months under comparison), while EBIT totaled Euro 80.7 million, or 10.6% of net revenues (15.4% in the three months under comparison).
Facing this further deterioration of the economic scenario, the management started new short-term actions in order to curb the overall level of operating costs, and, at the same time, continued to work on the product offer in order to support sales, leveraging on creativity and spirit of innovation.
Management Discussion and Analysis for the nine months ended October 31, 2015
Distribution channels
In the nine months ended October 31, 2015, retail sales amounted to Euro 2,253.5 million, showing an increase of 3.8% at current exchange rates and a reduction of 4.9% at constant exchange rates. The growth during the period was positively contributed by 32 net stores opening compared to October 31, 2014 (46 openings and 14 closures). By geographical area, results were affected by the exchange rate fluctuations since the weakening of the Euro currency encouraged, until the summer, the flows of tourists into the Eurozone and increased the counter value of the net sales generated in the various foreign currencies. Europe and Italy showed a growth, while Americas and Middle East showed a growth in sales only at current exchange rates. The Asia Pacific region was negative overall. The results in Japan were instead positive regardless of trend of the Japanese Yen, as retail sales also increased at constant exchange rates and DOS number (the Same Store Sales Growth rate was positive).
The wholesale channel generated net sales of Euro 295.5 million, down by 15.9% at current exchange rates and by 21.4% at constant exchange rates. The continued selective strategy on independent customers (the latter also responds to the need to limit the parallel market) significantly affected the performance of the period together with the crisis linked to MERS in South Korea.
Markets
In the nine months ended October 31, 2015, the Asia Pacific market generated net sales of Euro 845.6 million, down by 6.3% at current exchange rates and by 19.1% at constant exchange rates. Reductions in local consumptions as well as tourists flow from Mainland China significantly impacted the area, especially in Hong Kong and Macau where the decline in sales was more evident. The Greater China (Hong Kong, Macau and China) contributed net sales of Euro 536.2 million, down by 5.6% at current exchange rates and by 20.9% at constant exchange rates.
In Europe, net sales amounted to Euro 557.4 million, recording an increase of 2.4% at current exchange rates and an increase of 0.8% at constant exchange rates. The retail, thanks both to the existing stores (SSSG positive) and the new openings (net 4 more DOS compared to October 31, 2014), led the sales performance in the area. The growth recorded in the region was diluted by the contractions reported in Great Britain and in Switzerland, where the trend of the respective local currencies penalized visitors. The results for the wholesale channel were negative both at current and constant exchange rates for the above mentioned reasons.
The Italian market achieved net sales of Euro 406.4 million, up by 0.9% over the same period of 2014. Retail channel sales reported a double-digit growth throughout the period especially thanks to the tourist flows favored by a weak Euro and despite the number of store networks remained the same from the comparable nine months. The only opening in the last twelve months was the Prada store in Galleria Vittorio Emanuele II in Milan (that became a DOS on April 1, 2015, after a period when it was operated under a franchise agreement by a related party). On the other hand, the selective strategy coupled with the poor performances in the secondary cities led to a double-digit percentage decline of the wholesale business.
Net sales in the American market amounted to Euro 365.4 million in the nine months ended October 31, 2015, reporting a growth of 8.6% at current exchange rates and a reduction of 7.8% at constant exchange rates. Retail and wholesale channels showed substantially the same trend compared to the comparable period. The strengthening of the US Dollar had a negative impact on travelers in the region. In the retail channel, it is worth noting the organic development of the Canadian market.
The Japanese area, also supported by tourist flows, showed the most significant and stable growth across the nine months, reporting net sales of Euro 286.4 million which were up by 10.4% at current exchange rates and up by 4.6% at constant exchange rates. The progress in Japan alone was even bigger because the overall results of this area were penalized by the decline
20
of the flows of tourists in Hawaii (which belong to the commercial area of Japan) caused by the weakening of the Japanese Yen against the US dollar.
The Middle East generated net sales totaling Euro 83.4 million, up by 12.7% at current exchange rates and down by 4.8% at constant exchange rates. The entire region suffered from lower flows of tourists.
Products
Leather goods posted net sales of Euro 1,553.3 million, reporting a decline of 3.8% at current exchange rates and a decline of 11.6% at constant exchange rates compared to the same period of 2014. The contraction was mainly due to the Prada brand which was particularly affected by the suffering of the Asia Pacific and American markets.
Clothing recorded net sales of Euro 422.6 million, up by 2.5% compared to the results achieved in the same period of 2014. At constant exchange rates, the trend showed a decline of 5.6%, except for Japan where growth was achieved also at constant exchange rates.
The footwear division generated net sales of Euro 523.2 million, posting a 15.8% growth compared to the results achieved in the same period of 2014. The increase in sales was achieved also at constant exchange rates (+5.9%) and in all regions.
Brands
The Prada brand recorded net sales of Euro 2,065.8 million, down compared to the same period of last year: by 0.8% at current exchange rates and by 8.9% at constant exchange rates.
Miu Miu brand generated net sales of Euro 411.7 million, recording an increase of 10.2% at current exchange rates and of 0.9% at constant exchange rates. Sales growth was driven mainly by the positive sale performances by shoes and leather goods, but partially offset by the decline in the ready-to-wear division. From a geographical point of view, with the exception of Asia Pacific, sales from Miu Miu increased at constant exchange rates in all regions, and notably in Middle East.
In the nine months ended October 31, 2015, the Church's brand posted net sales of Euro 60.5 million, 10.1% up at current exchange rates and 1.7% up at constant exchange rates over the same period a year earlier. The commercial development was achieved thanks to the expansion of the retail channel which showed net sales growth also on a SSSG basis. This development was diluted by the contraction recorded by the wholesale in Europe.
The net sales recorded by the Car Shoe brand were penalized by the contraction of the wholesale and by the closure of the DOS operating in London, Hong Kong and Singapore.
Royalties
During the nine months ended October 31, 2015, the licensing business generated income amounting to Euro 33.5 million, which showed an increase
21
of 16.2% over the same period of last year. The development has been achieved through both the eyewear and the fragrance businesses, thanks also to the launch of the first Miu Miu fragrance in August.
Operating results
Gross margin for the nine months ended October 31, 2015, amounted to Euro 1,887.1 million. As a percentage of net revenues, the gross margin increased from 72% to 73.1% following the favorable effect of the exchange rates, the improvements in industrial margins and the price adjustments implemented also to balance the spreads among countries. Nevertheless, the geographical and product mix of the nine months period were less favorable if compared to the same period last year.
Operating expenses increased overall from Euro 1,340 million to Euro 1,513.2 million, raising their incidence on net revenues from 52.5% to 58.6%. In absolute terms, the increase was attributable to the selling expenses, essentially following the enlargement of the retail structure. To a lesser extent, the increase in the activities of advertising and communication resulted in an increase in operating expenses because of the higher spending for media spaces, retail events and special projects. Other operating costs were almost unchanged in absolute terms compared to the period under comparison, thanks to the actions undertaken in the first months of the year and after the summer to improve the efficiency of operational processes and reduce discretionary expenses. Overall, the increased incidence of the operating expenses negatively impacted profitability with EBITDA that went from 26.7% to 23.1%, and EBIT, from 19.5% to 14.5%.
The financial charges impacted the income statement for Euro 18.5 million, slightly more than in the period under comparison. This was mainly due to interest expenses on borrowings following the higher average level of bank debt in the current period. Income taxes, although lower in absolute terms compared to the nine months ended October 31, 2014, showed a higher effective tax rate because of a different geographical distribution of the taxable income.
22
Net invested capital
The following table contains the Statement of financial position reclassified in order to provide a better picture of the composition of the Net invested capital.
| (amounts in thousands of Euro) | as at
October 31
2015
(unaudited) | as at
January 31
2015
(audited) |
| --- | --- | --- |
| Non-current assets (excluding deferred tax assets) | 2,567,580 | 2,557,198 |
| Trade receivables, net | 248,256 | 346,284 |
| Inventories, net | 795,674 | 654,545 |
| Trade payables | (311,639) | (437,420) |
| Net operating working capital | 732,291 | 563,409 |
| Other current assets (excluding financial position items) | 215,644 | 190,149 |
| Other current liabilities (excluding financial position items) | (261,078) | (411,878) |
| Other current assets/(liabilities), net | (45,434) | (221,729) |
| Provisions for risks | (65,657) | (63,695) |
| Post-employment benefits | (68,298) | (85,754) |
| Other long-term liabilities | (167,401) | (159,419) |
| Deferred taxation, net | 259,867 | 239,349 |
| Other non-current assets/(liabilities), net | (41,489) | (69,519) |
| Net invested capital | 3,212,948 | 2,829,359 |
| Shareholders' equity – Group | (2,997,517) | (3,000,737) |
| Shareholders' equity – Non Controlling Interests | (17,653) | (17,410) |
| Total consolidated Shareholders' equity | (3,015,170) | (3,018,147) |
| Long term financial payables | (416,707) | (254,462) |
| Short term financial, net surplus/(deficit) | 218,929 | 443,250 |
| Net financial position surplus/(deficit) | (197,778) | 188,788 |
| Shareholders' equity and Net of positive financial position | (3,212,948) | (2,829,359) |
| Debt to Equity ratio | 0.07 | n.a. |
At October 31, 2015, Net invested capital stand at Euro 3,212.9 million, an increase of Euro 383.6 million compared to the figure reported at January 31, 2015.
The non-current assets, excluding deferred tax assets, amounts to Euro 2,567.6 million at October 31, 2015, and the change compared to Euro 2,557.1 million at January 31, 2015, is negligible as the investments for the period, amounting to Euro 234.7 million, were almost equal to the depreciation and amortization charges. The capital expenditure were allocated to the retail area for Euro 144.2 million, to the corporate area for Euro 52.9 million and to the industrial and logistics area for Euro 37.6 million. Retail investments for the period were supported in order to strengthen further the retail network through 29 new openings and 27 projects dedicated to renewals, expansions and relocations of existing stores.
The net operating working capital at October 31, 2015, amounts to Euro 732.3 million, up by Euro 168.9 million from the figure of Euro 563.4 million reported at January 31, 2015. The increase was mainly attributable to a higher level of the stock of finished products due to the different approach
23
to replenishment which started in the last few months of 2014, to the 18 DOS openings from January 31, 2015, and to the volume of sales in the last months of 2015 which were lower than expected.
Other current liabilities, net, decreased from Euro 221.7 million at January 31, 2015, to Euro 45.4 million, mainly as a result of the payment of debts for investments and the closure of derivative financial contracts.
The decrease in other non-current liabilities, net, which are equal to Euro 41.5 million as at October 31, 2015, and were Euro 69.5 million as at January 31, 2015, was mainly generated by the payment of a first tranche of long-term benefits plans to key employees, as well as by higher temporary differences between the tax value and the value in the Consolidated financial statements of the inventory of finished goods.
The Group shareholders' equity at October 31, 2015, is almost unchanged compared to the figure of Euro 3,000.7 million reported at January 31, 2015. The income for the nine months period and the positive change in the translation reserve due to the revaluation of net assets denominated in currencies other than the Euro were offset by the distribution of dividends to the shareholders of PRADA spa for Euro 281.5 million.
Net financial position surplus/(deficit)
| (amounts in thousands of Euro) | as at October 31 2015 (unaudited) | as at January 31 2015 (audited) |
|---|---|---|
| Long-term debt | (417,448) | (255,203) |
| Long-term financial receivables due from related parties | 741 | 741 |
| Long-term financial payables | (416,707) | (254,462) |
| Bank overdraft and short-term loans | (305,886) | (263,335) |
| Payables to related parties | (2,433) | (2,371) |
| Receivables from related parties | - | 11 |
| Obligations under finance leases | - | (21) |
| Cash and cash equivalents | 527,248 | 708,966 |
| Short-term net financial surplus/(deficit) | 218,929 | 443,250 |
| Net financial position surplus/(deficit) | (197,778) | 188,788 |
At October 31, 2015, the Group's net financial position is negative and equal to Euro 197.8 million. The cash flows from operating activities, net, amounted to Euro 200.8 million and, together with the use of existing funds, was used to support the investments for the period (Euro 304.6 million), pay dividends to the shareholders of PRADA spa (Euro 281.5 million) and absorb the increase in the net operating working capital (Euro 168.9 million). It is also worth highlighting that the Group, in order to improve its financial flexibility, while also taking advantage of the favorable conditions on the
24
credit market, signed in the period new medium/long-term facilities in Euro and Japanese yen for a total amount of approximately Euro 190 million.
Outlook
Over the last few months there was a general worsening of the macroeconomic environment: in particular, continuing volatility on financial markets and rising fears on the social and political landscape have made consumers less willing to spend and decreased tourist flows in some countries. Against this background and also in light of the far-reaching changes underway in the luxury goods segment, the Group is further stepping up all its commercial and product-related initiatives to strengthen relations with its increasingly sophisticated and demanding customer base. At the same time, further cost containment measures were implemented following a review of all business processes.
Stylistic continuity, one of the Group’s core strengths, together with a flexible organization capable of adapting to market changes, will be key features of the Group’s strategy in the near future. This will allow the Group to react to evolution in demand through design and creative decisions always in line with the tradition and positioning of its brands. To this extent, the management is reviewing the organization in order to streamline processes and further strengthen it with new key personnel. In the medium-term, the Group remains optimistic about the outlook for the segment and confident that the undoubted stylistic leadership of its brands and its positioning - with global coverage already secured by its extensive retail network - will be key factors in facing up successfully to future challenges.
25
26
Corporate governance practices
Audit Committee
The Audit Committee, which comprises three independent non-executive directors, on December 15, 2015, has reviewed the unaudited consolidated results of the Company and its subsidiaries for the nine months ended October 31, 2015.
Compliance with the Corporate Governance Code of the Listing Rules
The Board has reviewed the Company's corporate governance practices and is satisfied that the Company has complied with the applicable code provisions set out in the Corporate Governance Code contained in Appendix 14 of the Listing Rules during the nine months ended October 31, 2015.
Purchase, Sale, or Redemption of the Company's Listed Securities
Neither the Company nor any of its subsidiaries has purchased, sold or redeemed any of the Company's listed securities during the nine months ended October 31, 2015.
Publication of Announcement on Consolidated results for the nine months ended October 31, 2015
This announcement on the consolidated results for the nine months ended October 31, 2015, is published on the Company's website at www.pradagroup.com and on the Hong Kong Stock Exchanges' website at www.hkexnews.hk.
By Order of the Board
PRADA S.p.A.
Mr. Carlo Mazzi
Chairman
Milan (Italy), December 15, 2015
As at the date of this announcement, the Company's executive directors are Mr. Carlo MAZZI, Ms. Miuccia PRADA BIANCHI, Mr. Patrizio BERTELLI, Mr. Donatello GALLI and Ms. Alessandra COZZANI; the Company's non-executive director is Mr. Gaetano MICCICHE and the Company's independent non-executive directors are Mr. Gian Franco Oliviero MATTEI, Mr. Giancarlo FORESTIERI and Mr. Sing Cheong LIU.